02709cam a22002777 4500001000700000003000500007005001700012008004100029100002000070245011200090260006600202490004200268500001900310520140500329530006101734538007201795538003601867690012901903690008902032690010002121700001602221710004202237830007702279856003802356856003702394w16807NBER20170818000354.0170818s2011 mau||||fs|||| 000 0 eng d1 aAguiar, Mark A.10aHas Consumption Inequality Mirrored Income Inequality?h[electronic resource] /cMark A. Aguiar, Mark Bils. aCambridge, Mass.bNational Bureau of Economic Researchc2011.1 aNBER working paper seriesvno. w16807 aFebruary 2011.3 aWe revisit to what extent the increase in income inequality over the last 30 years has been mirrored by consumption inequality. We do so by constructing two alternative measures of consumption expenditure, using data from the Consumer Expenditure Survey (CE). We first use reports of active savings and after tax income to construct the measure of consumption implied by the budget constraint. We find that the consumption inequality implied by savings behavior largely tracks income inequality between 1980 and 2007. Second, we use a demand system to correct for systematic measurement error in the CE's expenditure data. Specifically, we consider trends in the relative expenditure of high income and low income households for different goods with different income (total expenditure) elasticities. Our estimation exploits the difference in the growth rate of luxury consumption inequality versus necessity consumption inequality. This "double-differencing,'' which we implement in a a regression framework, corrects for mis-measurement that can systematically vary over time by good and income group. This second exercise indicates that consumption inequality has closely tracked income inequality over the period 1980-2007. Both of our measures show a significantly greater increase in consumption inequality than what is obtained from the CE's total household expenditure data directly. aHardcopy version available to institutional subscribers. aSystem requirements: Adobe [Acrobat] Reader required for PDF files. aMode of access: World Wide Web. 7aE2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy2Journal of Economic Literature class. 7aE21 - Consumption • Saving • Wealth2Journal of Economic Literature class. 7aJ31 - Wage Level and Structure • Wage Differentials2Journal of Economic Literature class.1 aBils, Mark.2 aNational Bureau of Economic Research. 0aWorking Paper Series (National Bureau of Economic Research)vno. w16807.4 uhttp://www.nber.org/papers/w1680741uhttp://dx.doi.org/10.3386/w16807